2017 Spring Budget commentary

Productivity is the centrepiece of the Budget, with several specific infrastructure projects being allocated funding from the £23 billion fund previously announced in the Autumn Statement. The new funding, and major new initiatives, announced in the Budget however concern education. New resource will be made available to support the creation of more than a hundred free schools. Controversially, these include new selective schools. It is widely recognised that such schools provide benefit to students that attend them – owing largely to positive peer effects – but precisely the same peer effects seem to operate in the opposite direction for students who are left to attend other schools. While the impact of selective schools on social mobility is limited, the anecdotes of those who benefit from them seem to be powerful. It is surprising that the government should invest so much political capital in a policy that promises to have so little positive effect.

The Budget heralded also a reform of technical and vocational education, with a major tidying-up exercise being conducted on the current 13000 qualifications in this area. These will be replaced by just 15 new T-level qualifications. The increased transparency and simplicity that this will provide is certainly welcome. International comparisons suggest that this is an area in which the British education system has lagged for some time. While around 22% of workers in the UK have vocational qualifications (NVQ levels 2-3), the corresponding percentages in France and Germany are 35 and 55. Considerable care will, however, need to be taken to ensure that the new technical qualifications deliver the right thing at the right time – and there is a risk that they will not. We know that the job market has been polarising, with advances in technology leading to jobs vanishing from the middle part of the skills distribution. Whatever skills T-level candidates gain must equip them to be creative and adaptable, with the expectation that the tasks they undertake at work will morph rapidly over time.

All of this makes another of the Budget announcements – £40 million to support pilot projects in the area of lifelong learning – particularly welcome.

Outside the sphere of productivity, the Chancellor announced £2 billion additional support over a 3 year period with which local authorities can fund adult social care. A Green Paper containing proposals to develop a sustainable funding model in this area will be produced later in the year. This extra support is welcome, as research we have undertaken at the Work Foundation has previously highlighted the squeeze faced by care providers.

The fiscally neutral stance of the Budget helps maintain the government’s ambition to clear the deficit over the medium term. It does this, however, against the backdrop of monetary policy that is ineffective owing to the record low level of the interest rate. A modest relaxation of fiscal constraints in order to allow the central bank to tighten monetary policy may have helped more speedily to restore the economy to normality, and to restore also to policymakers the full armoury of policy tools. But the Chancellor is cautious by nature, and it is on the cautious side that this Budget errs.